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Investor Preference for CRE Drops for Fifth Straight Quarter
Investor preference for commercial real estate dropped for the fifth consecutive quarter to a record low in Q1 as investors pointed to short-term economic uncertainty and declining values, SitusAMC reported in its latest quarterly ValTrends research report. Stocks were rated slightly lower due to market volatility, and the preference for bonds was the second highest since 2007, when the data began to be collected.
The report also found that capital availability trends have begun to mirror those seen in the depths of the Global Financial Crisis. Although equity capital availability remained unchanged in Q1, it was the lowest since at least 2014, when the survey first began tracking debt and equity separately.
Investors still favor apartments as the top CRE sector. However, this preference fell substantially quarter over quarter to the lowest level since the onset of the pandemic. Office remained at the bottom of investor rankings, while the preference for retail rose to 31% from just 11% a year ago.
“That’s quite a substantial improvement,” said Peter Muoio, head of SitusAMC Insights. Conversely, he said, “Investors perceive the office segment as the riskiest relative to return among property types, and the first-quarter rating was the lowest we’ve seen in history for office space. Investors believe office will continue to retrench as remote and hybrid work reduces office space usage in coming years.”
- ◦Sale/Acquisition
